AN ANALYSIS OF INFORMATIONAL RESTRICTIONS ON THE LENDING DECISIONS OF FINANCIAL INSTITUTIONS

Lenders are assumed to use formal credit scoring schemes in order to evaluate borrower credit worthiness. Variables used in these schemes may be measured with error resulting in credit scores which include the effects of biased parameter estimates, and in lending decisions that appear to be discriminatory although lenders are not prejudiced. Regulations which restrict the information used in credit scoring schemes may produce undesirable credit supply results. Theoretical models are supplemented with illustrative empirical analysis of mortgage lending in which use of information on property location is prohibited. The empirical results indicate that the quantitative impact of such regulations is modest.     

ARM-BREAKING, CONSUMER CREDIT AND PERSONAL BANKRUPTCY

The consumer credit transaction is analyzed as a contract which provides insurance as well as present consumption for the borrower. Creditors' remedies such as "arm-breaking" are shown to facilitate provision of insurance (forgiveness of debts) when lenders cannot monitor outcomes. Alternatively, if outcomes are observable but lenders do not ex ante know the risk associated with each borrower, the market may generate an excessive amount of arm-breaking and agreements to forgo discharge following bankruptcy as low risk borrowers signal their characteristics, suggesting that government limitations on such provisions might be efficient. The secured credit transaction is shown to be a complex contract which attempts to provide efficient repayment, seller incentives for performance and mitigation following default, and insurance for the borrower. Garnishment and discharge of debts following bankruptcy are also considered.     

Trust and social capital in the regulation of lending activities

When a bank grants a loan, it takes the risk that the borrower will not honor his debt. To reduce this uncertainty, banks have created instrumental evaluation methods in order to try to evaluate the risk more objectively. An analysis of financial counselors’ practices shows the limits of these methods. To obtain information needed for the financial risk evaluation and to reduce the information asymmetry between bankers and borrowers, financial counselors integrate social networks to establish bonds of trust and to accumulate social capital. The quality of the social bond determines the quality of the gathered information and therefore the quality of the risk evaluation. Bank management is aware of the limits of instrumental methods and the importance of social risk evaluation. To improve their economic efficiency, they modify their work organization and their management practices so as to facilitate the emergence of a bond of trust and the accumulation of social capital by their financial counselors. The analysis of economic actors’ speech and behavior involved in activities of credit shows that behind the claimed altruism nature of the trust relationship exists an economic rationality whose social and temporal horizons of optimization differ from the model of the trade exchange seen in conventional economic theory.     

Consumer bankruptcy and default: The role of individual social capital

In this paper, we empirically assess the role of individual social capital on personal bankruptcy and default outcomes in the consumer credit market. After controlling for a borrower’s risk score, debt, income, wealth, and legal and economic environments, we find that default/bankruptcy risk rises and then falls over the lifecycle, while a borrower who owns a home or is married has a lower risk of default/bankruptcy. Moreover, a borrower who migrates 190 miles from his “state of birth” is 17% more likely to default and 15% more likely to file for bankruptcy, while a borrower who continues to live in his state of birth is 14% and 10% less likely to default and file for bankruptcy, respectively. A borrower who moves to a rural area is 9% and 7% less likely to default and declare bankruptcy, respectively. We also find that measures of social networks, norms, and cooperation and trust (i.e., aggregate social capital) are inversely related to consumer bankruptcy.     

Government Debt and Excess Sensitivity of Private Consumption: Estimates from OECD Countries

This article investigates the role of government debt in the degree of excess sensitivity of private consumption to current disposable income. Because this type of excess sensitivity is generally attributed to liquidity constraints, this amounts to a test of the impact of government debt on the amount of credit extended to individuals. Controlling for financial liberalization we find that, for a panel of OECD countries in the 1990s, a high government debt leads to more excess sensitivity. This result supports the idea that a high government debt induces lenders to tighten credit conditions. Our findings survive several robustness checks.     

Embeddedness and capital markets: Bank financing of businesses

The article examines the social and economic dimensions of capital markets, particularly the effects of bank and capital market structure; lending criteria and bank policies; and demand for credit, on bank financing of businesses. A critical problem in most capital markets is that lenders have inadequate information to assess the risk and creditworthiness of loan applicants. We find that many bankers continue to use assessments of character as a signal of the potential borrower's creditworthiness. Banking deregulation limits the range of signals available to lenders and therefore may have detrimental consequences for banks and local economies.     

Over‐indebtedness and microcredit in Cambodia: Moving beyond borrower‐centric frames

Over the past two decades, Cambodia has experienced an unprecedented credit boom, a growth in lending so rapid that the International Monetary Fund (IMF) referred to it as “one of the fastest financial deepening episodes by historical cross‐cultural standards” (IMF, 2016, p. 4). This deepening has been driven by the expansion of microcredit. In tandem, over‐indebtedness has increased among microcredit borrowers, and debt has become a significant political and economic concern. This article explores how over‐indebtedness is understood and explained by stakeholders across microcredit value chains. To do so, we draw on interviews with microfinance institution (MFI) executives, investors, branch managers, partners, financial literacy trainers, loan officers and borrowers in Siem Reap and Phnom Penh. We find that across the sector, dominant framings of over‐indebtedness privilege borrower‐centric explanations, while discounting the structural drivers of excessive lending and borrowing. As a consequence, current efforts to limit over‐indebtedness are unlikely to produce the kinds of solutions that are most needed to reduce the debt stress among borrowers. These arguments have implications across the Global South, particularly for contexts where microfinance is rapidly expanding.     

When people become patients: fluctuations in trust from the cancer patient’s perspective

This study explores the trust relationships between cancer patients and their physicians by discussing the concept of trust and the collection of patients’ medical experiences before and after being diagnosed with cancer. The purpose of the study is to determine changes in patients’ trust during this process. This ethnographic study was conducted from 2009 to 2014 on doctor–patient relationships under the coverage of the National Health Insurance (NHI) in Taiwan. Under the NHI, patients may access physicians and acquire treatment at low cost. In this study, the sample comprised 12 female cancer patients. Data were collected in in-depth interviews with six patients. With the bloggers’ consent, data were collected from six blogs. These data were analyzed to determine how these cancer patients constructed and altered their opinions during their diagnosis and treatment. The results are discussed according to the calculative trust that was constructed based on information collected and/or impressions developed during their initial visits. The findings showed that relational trust was developed and (dis)evolved through interactions and experiences with medical staff. In addition, calculative trust was generated based on the following: eliminating institutions or physicians with which the patients had negative experiences; feeling and perceiving caring and professional competence; yielding to cancer and respecting professional reputations. Relational trust was derived from the following: the doctors’ ability to sooth patients’ anxieties and explain uncertainties; the compatibility of expectations in information sharing between physicians and patients. The results showed that in the early stage of developing a doctor–patient relationship, calculative and relational trusts were intertwined. As the doctor–patient relationship developed, the patients’ relational trust increased. The findings of this study contribute to the knowledge concerning the co-construction of patients’ trust in physicians in medical systems through communication between patients and medical staff.     

Predatory Inclusion in Consumer Credit: Explaining Black and White Disparities in Payday Loan Use

Payday loans are a high-cost form of credit, yet they remain a popular financial tool used by a significant proportion of Americans. Use of these loans varies significantly across social groups. Black households in particular are more than twice as likely to use payday lending as white households. Explanations for households’ decision to use payday loans remain disputed. Some scholars argue that poor financial literacy is a major driver of payday borrowing. Others propose instead that payday loans are a form of credit of last resort used after depleting higher quality sources of credit. In this article, I argue these explanations are incomplete and miss the racialized nature of payday lending. Payday lending is a form of predatory inclusion: it provides households experiencing exclusion from consumer credit markets with a needed source of credit but under conditions that jeopardize long-term benefits of access. Given historical and contemporary patterns of financial exclusion, this process entails disproportionate reliance on payday lending by black households. Models using data from the Survey of Consumer Finances provide support for both the predatory inclusion and the credit exhaustion explanations. Predatory inclusion, however, explains the largest portion of racial disparities in payday loan use.     

Effects of Family Life-Cycle Stages on Consumer Debts

Using the 1998 Survey of Consumer Finances (SCF), this study examined factors related to two types of consumer debt: installment debt and credit card debt. To address the limitations of the conventional life-cycle hypothesis, the study incorporated ability, willingness, and need to borrow, and prudence as well as life-cycle stages in the conceptual framework. The results of the double-hurdle model showed that life-cycle stages, willingness and ability to borrow, prudence, and the need to borrow were significant factors affecting installment debt and credit card debt. Based on the results, implications for financial counselors and educators, lenders, consumers, and policy makers are discussed.     

The relationship between bankers and farmers: An analysis of Britain and Ireland

The financial sector is playing a more central role in agriculture. This article analyzes the external provision of finance for farmers in Britain and the Irish Republic, drawing principally on interviews with bankers and specialist providers of agricultural finance. The development of farm credit institutions in the two countries and their subsequent commercialization is discussed. Agriculture is commercially attractive to lenders as part of a balanced portfolio because of its stable, low risk character. Credit selectivity is confirmed as a feature of lender behaviour, although its consequences are likely to be more far reaching in Ireland. Lenders' perceptions of the financial sophistication of farmers is assessed, the more financially sophisticated farmer being more receptive to the logic of the financial sector and hence a more attractive customer. An emphasis on tax avoidance can lead farmers into irrational borrowing decisions. Larger farmers are better placed to take advantage of lending opportunities and new financial instruments.     

Title lending as a predatory practice: Subprime populations and financial violence

The passage of the Dodd‐Frank Act in 2010 ushered in the most ambitious financial reforms since the Banking Act of 1933. The core of the Act centered on ensuring more consumer protections from predatory financial practices through the creation of the Consumer Financial Protection Bureau (CFPB), which provided federal oversight of fringe lenders that profited off of high‐interest loans such as payday and automobile title loans. Yet the current deregulatory environment being promoted by the Trump administration is once again loosening the reins on fringe lenders that provide quick access to cash at triple digit interest rates. In this article, I provide an overview of the alternative finance service industry with a specific focus on one such instrument: auto title loans. Drawing upon governmental reports and the literature, I provide a comprehensive overview of the how the industry functions and who it targets. By focusing on the profit model that undergirds the title loan industry, I show how the profitability of the industry is directly tied to the extended vulnerability of its customer base. I conclude by offering suggestions for researchers to rethink predatory lending practices as a form of financial violence in order to reframe the discourse surrounding predatory lending.     

A Cautionary Tale: Discriminatory Lending against Hispanic Farmers and Ranchers in Southern Colorado

Despite legal and civil emancipation, minorities in the United States continue to face extremely unequal opportunity structures in the financial realm. Evidence of this is found in the fact that segregation between Anglos and minorities has changed little since the civil rights era. This is particularly true for Hispanics, who have actually witnessed an increase in segregation in recent years. Although many factors have contributed to this outcome, unequal access to financial credit has played a particularly important role in maintaining the status quo between Hispanics and Anglos. In this article, I analyze the lasting impact of discriminatory lending within Hispanic communities in southern Colorado. I examine how unfavorable access to credit has contributed to wealth disparities in this region. My results demonstrate that lenders systematically denied Hispanic farmers and ranchers access to subsidized loans throughout the twentieth century. The lack of access to formal banking, the underappreciation of homes and land, and the deliberate isolation of Hispanics from formal institutions forced many Hispanic families to leave the area altogether. Ultimately, unequal access to credit has fostered deep inequalities between Anglos and Hispanics in the region, which, in turn, has reinforced ethnic tension between these two groups.     

Financial Credit: Social Work's Role in Empowering Low-Income Families

Social workers interact with families and communities that financially struggle and have credit challenges. Social workers could benefit from increasing their financial literacy to knowledgeably educate, assist, and refer families in financial need. Specifically, knowledge about credit is imperative in today's economy. This article provides information about financial credit, financial literacy efforts, and the basics about credit, credit reports, and credit scores. Discussion is centered on the roles social workers could play in assisting families to build credit and make sound financial decisions. Areas for policy advocacy about financial literacy and credit are delineated.     

MORE MORTGAGES,LOWER GROWTH?

In newly collected data on 46 economies over 1990–2011, we show that financial development since 1990 was mostly due to growth in credit to real estate and other asset markets, which has a negative growth coefficient. We also distinguish between growth effects of stocks and flows of credit. We find positive growth effects for credit flows to nonfinancial business but not for mortgage and other asset market credit flows. By accounting for the composition of credit stocks and for the effect of credit flows, we explain the insignificant or negative growth effects of financial development in recent times. What was true in the 1960s, 1970s, and 1980s when the field of empirical credit‐growth studies blossomed, is no longer true in the 1990s and 2000s. New bank lending is not primarily to nonfinancial business and financial development may no longer be good for growth. These trends predate the 2008 crisis. They prompt a rethink of the role of banks in the process of economic growth. (JEL E44, O16, O40, C33)     

上海市食品生产经营企业诚信体系建设研究

上海食品生产经营企业诚信体系建设,要在政府推进、企业实施、市场运作的基本架构下,进一步完善相关标准与法律,使食品生产经营企业的诚信体系建设有标准、有依据、有约束;要采取食品生产经营企业内部管理提升与外部征信体系建设同步推进的模式,一手抓整改建设,一手抓征信评估,以促进食品生产经营企业的诚信体系建设,提升企业的诚信水平;要进一步打通职能部门间的信息障碍,建设统一的信息共享平台,将食品生产经营企业诚信基本信息作为公共物品的形式,免费向社会公众开放;要充分发挥行业协会的行业约束、智力支持与评估认证的功能,使食品生产经营企业在诚信体系建设过程中,有依靠、有监督与反馈。     

Taking a risk? The mortgage industry and perceptions of disabled people

This paper examines a relatively overlooked force within disability; the appraisal of risk, with a specific focus on disability and housing. In this context the paper explores how risk can operate against disabled people, using a case study of mortgage industry responses to disabled people in the mortgage application process. Given the recent downward shift in the buoyancy of the housing market this is a timely focus. The events in the USA, which led to the sub‐prime market ‘collapse’, and the consequent impact on the UK have meant that lenders have become even more risk averse, withdrawing numerous mortgage products and reducing loan amounts. This has left many people unable to access the owner‐occupier sector, but for disabled people this can be even more difficult. The role of risk in ‘the disabling process’ is therefore of great importance, and is illustrated here through the practice of risk assessment.     

FINANCIAL FRICTIONS AND THE CHOICE OF EXCHANGE RATE REGIMES

This article provides a quantitative assessment of the role of financial frictions in the choice of exchange rate regimes. I use a two‐country model with sticky prices to compare different exchange rate arrangements. I simulate the model without and with borrowing constraints on investment, under monetary policy and technology shocks. I find that the stabilization properties of floating exchange rate regimes in face of foreign shocks are enhanced relative to fixed exchange rate in presence of credit frictions. In presence of symmetric and correlated shock, fixed exchange rates regimes can perform better than floating. This analysis can have important policy implications for accession countries joining the European Exchange Rate Mechanism II system and with high degrees of credit frictions. (JEL E3, E42, E44, E52, F41)     

Heifer‐in‐trust,Social Protection and Graduation: Conceptual Issues and Empirical Questions

This article examines the ‘heifer‐in‐trust’ or ‘livestock‐in‐kind credit’ model through a social‐protection lens. Specifically it seeks to engage with debates about the use of asset‐based strategies to support graduation from social protection. Drawing on project experience with dairy goats in Ethiopia and dairy cattle in Tanzania, the article concludes that while the asset‐ness of livestock may in principle allow them to make a unique contribution to livelihood transformation and thus graduation, the most obvious target group is least likely to be able to handle the demands and risks associated with livestock assets.